Innovative Industrial Properties, Inc. (NYSE:IIPR) Files An 8-K Entry into a Material Definitive Agreement

Item1.01.Entry into a Material Definitive Agreement.

In connection with the acquisition of the property located at
9220 Alaking Court in Capitol Heights, Maryland (the Property)
from PGHI LLC (Seller) described below in Item 2.01, on May 26,
2017, IIP-MD 1 LLC, a wholly owned subsidiary of IIP Operating
Partnership, LP (the Operating Partnership), the operating
partnership subsidiary of Innovative Industrial Properties, Inc.
(the Company), entered into a triple-net lease (the Lease) with
Holistic Industries LLC (Holistic) for the entire Property. The
Lease provides that Holistic, as tenant, is responsible for
paying all structural repairs, maintenance expenses, insurance
and taxes related to the Property. The Lease term is 16 years,
with three options to extend the term of the Lease for three
additional five-year periods. Holistic intends to operate the
Property as a medical-use cannabis cultivation facility, having
received provisional approval for the cultivation of medical-use
cannabis by the Maryland Medical Cannabis Commission.

The initial annualized base rent (the Initial Base Rent) under
the Lease is $1,200,000, payable monthly, which is equal to 15%
of the initial purchase price of the Property of $8 million (the
Initial Purchase Price) and which will be abated for the first
three months of the Lease term. The Company also agreed to
separately fund a rent reserve for Holistic equal to $1.9 million
for the estimated Aggregate Base Rent (as defined below) and
property management fee payable from month four through month
twelve, which will be drawn down each month (starting in month
four) to pay such obligations until depleted, and which will be
amortized and paid to the Company by Holistic in equal monthly
payments of $26,259.74, commencing in month four and continuing
through the initial term of the Lease (the Rent Reserve
Amortization Payments). Upon payment by the Company to the Seller
of up to $3 million as reimbursement for additional costs to
develop the Property (the Additional Purchase Price), base rent
will increase by an annualized amount equal to 15% of the
Additional Purchase Price, payable monthly (the Additional Base
Rent). Upon payment by the Company to Holistic of up to $4
million as reimbursement for costs to make certain tenant
improvements at the Property (the TI Allowance), base rent will
increase again by an annualized amount equal to 15% of the TI
Allowance, payable monthly (together with the Additional Base
Rent and Initial Base Rent, the Aggregate Base Rent). The
Aggregate Base Rent thereafter (excluding the Rent Reserve
Amortization Payments) shall increase at a rate of 3.25%
annually, starting on the earlier to occur of the first
anniversary of the date of payment of the Additional Purchase
Price and August 31, 2018.

to the Lease, Holistic delivered to the Company an initial
security deposit of $1.1 million in cash at the execution of the
Lease. On or before the first anniversary of the commencement of
the Lease, Richard Cohen, a principal of Holistic, shall be
obligated to, at Mr. Cohen’s option, 1) execute a limited
guaranty with respect to Holistic’s obligations under the Lease
for an amount of up to $3 million; 2) provide a $3 million letter
of credit for Holistic’s obligations under the Lease; or 3)
cause the required security deposit under the Lease to be
increased to $3 million, plus three months of Aggregate Base
Rent. If Mr. Cohen elects (1) or (2) from the immediately
preceding sentence, the security deposit will be reduced to three
months of Aggregate Base Rent.

In addition, any entity affiliated with Holistic and operating in
the cannabis industry in the state of Maryland, including any
entity formed during the term of the Lease, shall enter into a
full guaranty with respect to Holistic’s obligations under the
Lease.

Under the Lease, Holistic has a right of first offer with respect
to the purchase of the Property, and has an option to purchase
the Property at the end of the initial term of the Lease.

The foregoing description of the Lease does not purport to be
complete and is qualified in its entirety by reference to the
complete text of the Lease, which is filed as an exhibit to this
report and incorporated herein by reference.

Item2.01 Completion of Acquisition or Disposition of
Assets.

On May 26, 2017, the Company, through IIP-MD 1 LLC, completed the
acquisition of the Property to the terms of a Purchase and Sale
Agreement and Joint Escrow Instructions dated as of May 1, 2017
between the Operating Partnership and the Seller (the Purchase
Agreement). The Purchase Agreement was assigned by the Operating
Partnership to IIP-MD 1 LLC prior to completion of the
acquisition. The execution of the Purchase Agreement was
previously disclosed in the Companys Current Report on Form 8-K
filed with the Securities and Exchange Commission on May 4, 2017.

The Property includes a two-story medical-use cannabis
cultivation facility that is currently under development and is
expected to comprise approximately 72,000 square feet upon
completion. The Company funded the Initial Purchase Price of the
Property using a portion of the proceeds of its initial public
offering, which closed in December 2016. If the Company funds the
full amount of the Additional Purchase Price under the Purchase
Agreement and the TI Allowance under the Lease, the Company’s
total investment in the Property is expected to be $15 million.

The foregoing description of the Purchase Agreement is not
complete and is subject to, and qualified in its entirety by, the
full text of the Purchase Agreement, which is filed as an exhibit
to this report and incorporated herein by reference. The Purchase
Agreement contains representations and warranties made by the
parties as of specific dates and solely for their benefit. The
representations and warranties reflect negotiations between the
parties and are not intended as statements of fact to be relied
upon by the Companys stockholders or any other person or entity
other than the parties to the Purchase Agreement and, in certain
cases, represent allocation decisions among the parties and may
be subject to important qualifications and limitations agreed to
by the parties in connection with the negotiation of the Purchase
Agreement (which disclosures are not reflected in the Purchase
Agreement itself, may not be true as of any date other than the
date made, or may apply standards of materiality in a way that is
different from what may be viewed as material by stockholders).
Accordingly, the representations and warranties may not describe
the actual state of affairs at the date they were made or at any
other time, and stockholders should not rely on them as
statements of fact. Moreover, information concerning the subject
matter of the representations and warranties may change after the
date of the Purchase Agreement.

Item7.01 RegulationFD Disclosure.

On May 30, 2017, the Company issued a press release regarding the
closing of the acquisition of the Property. A copy of the press
release is attached hereto as Exhibit99.1. The information
contained in Item 7.01 of this report, including Exhibit99.1, is
being furnished and shall not be deemed filed for purposes of
Section18 of the Securities Exchange Act of 1934, as amended, or
otherwise subject to the liabilities of that section. Such
information shall not be incorporated by reference into any
filing of the Company, whether made before or after the date
hereof, regardless of any general incorporation language in such
filing.

Item9.01 Financial Statements and Exhibits.

The financial statements that are required to be filed to this
item will be filed by amendment not later than 71days following
the due date of this report.

The pro forma financial information that is required to be filed
to this item will be filed by amendment not later than 71days
following the due date of this report.

Forward-Looking Statements

This report contains statements that the Company believes to be
forward-looking statements within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995. All statements other than historical facts, including,
without limitation, statements regarding the development of the
Property, the Lease and Holistic, are forward looking statements.
When used in this press release, words such as the Company
expects, intends, plans, estimates, anticipates, believes or
should or the negative thereof or similar terminology are
generally intended to identify forward-looking statements. Such
forward-looking statements are subject to risks and uncertainties
that could cause actual results to differ materially from those
expressed in, or implied by, such statements. Investors should
not place undue reliance upon forward-looking statements.

About Innovative Industrial Properties, Inc. (NYSE:IIPR)

Innovative Industrial Properties, Inc. is focused on the acquisition, ownership and management of specialized industrial properties leased to state-licensed operators for their regulated medical-use cannabis facilities. The Company intends to acquire its properties through sale-leaseback transactions and third-party purchases. It is focused on leasing its properties on a triple-net lease basis, where the tenant is responsible for all aspects of and costs related to the property and its operation during the lease term, including maintenance, taxes and insurance. The Company intends to conduct business in an umbrella partnership real estate investment trust (UPREIT), structure through its operating partnership. The Company’s real estate investments will consist of primarily properties suitable for cultivation and production of medical-use cannabis.

Innovative Industrial Properties, Inc. (NYSE:IIPR) Recent Trading Information

Innovative Industrial Properties, Inc. (NYSE:IIPR) closed its last trading session up +0.20 at 17.24 with 16,717 shares trading hands.